This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

The Deal: Bank Earnings Reveal Lackluster M&A Activity

NEW YORK ( The Deal) -- Investment bank chiefs say there are few indicators of a meaningful recovery in M&A activity, with forecasts of double-digit falls in advisory revenue for the full year.

While J.P. Morgan (JPM) chief Jamie Dimon said, in the bank's second quarter earnings call July 12, the market was beginning to open with "a lot of M&A chatter", his CFO Marianne Lake was more circumspect on the strength of any deal recovery.

"What we're seeing and feeling in discussions with clients is that deal activity levels have picked up and may be turning and the pipeline feels a little better and solid but not strong," she told investors.

Greenhill & Co. (GHL) CEO Scott Bok noted in its quarterly results this week that a large portion of the advisor's M&A revenue had been driven by completion fees, with lower announcement fees in line with subdued activity levels.

Global M&A activity in the second quarter, with 8,539 deals, was at its lowest since the third quarter of 2005 according to Dealogic. Large-ticket transactions meant deal value at a total $629 billion was only its lowest since late 2012, though advisory revenues took a bigger hit--$3.74 billion-- representing the lowest level since the first quarter of 2010.

"For the full year we expect double digit declines in advisory revenue for the nine large banks that are our primary competitors, with declines growing larger during the second half," Bok said. Advisory league table are largely unchanged for the year to date. For the Americas region, JPMorgan, Goldman Sachs (GS) and Bank of America Merrill Lynch (BAC) retained their top three positions on the same period last year, with Morgan Stanley (MS) trumping Barclays (MS) and Deutsche Bank (DB) to round out the top six. JPMorgan does not break out its advisory fees while Goldmans' revenues in financial advisory were slightly higher in the second quarter at $486 million.

Bok said the equity rally and continued quantitative easing had dampened deal appetite, while other M&A heads have noted the appeal of cheap recapitalization as a reason for lackluster activity. The Greenhill chief said potential acquirers were reluctant to make acquisitions while valuations were pricey--with asset inflation via stimulus contributing to this. "When stimulus does start to wind down we'll see restructuring activity pick up and companies have more confidence in the market valuations of their targets leading to more M&A," he said.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,174.80 -104.94 -0.61%
S&P 500 1,994.35 -16.05 -0.80%
NASDAQ 4,519.0540 -60.7350 -1.33%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs